Power to make modifications

I beg to move amendment 25, in clause 18, page 16, line 21, at end add—

‘(d) the establishment of a competition for the construction of undersea high voltage direct current cables for the purposes of connecting offshore electricity generation to the onshore grid.’.

I hope that you may forgive me for one moment, Mr. Bayley, if before I speak to the amendment I refer to an issue that we discussed a little earlier. The Minister said in relation to gas storage issues that companies had not had to stop manufacturing. I have since had information from the Chemical Industries Association that of its 12 members whose power supplies were interrupted five had to shut down for the period in question; so there was an important implication for the interests of UK plc, and I hope it is appropriate to mention that.

We will have to check the record, but I was making the point that they should not have had to shut down, because if they have an interruptible contract, they should have alternative generation in place. If they chose to shut down manufacture, they did not make a sensible decision when taking an interruptible contract.

With that exchange over, we should move on to the amendment.

We shall return to the matter in due course.

The clause deals with access to markets, and I believe that we all agree that new generation capacity is of little value if it cannot connect to the national grid. We are all aware of a wide range of issues concerning connection. It is difficult to explain why some wind facilities that have received planning permission are being given grid connection dates a decade in the future, and even further ahead. A whole range of issues on connectivity need to be addressed as part of energy policy. Amendment 25 refers to the connection of offshore facilities.

The briefing provided for this part of the Bill states of the terms for connection of new generation electricity to the grid:

“The proposed change will clarify that Ofgem, in assessing the regime for grid connections, should consider the interests of consumers not only in efficient investment, but also in curbing emissions and in a secure energy supply. The Government believes that ensuring a regulatory framework that supports early, efficient deployment of low-carbon and other generation within a timeframe consistent with project development plans would meet the consumer interest.”

There is no doubt that we all agree that the phenomenal potential of offshore wind is a key part of that. We followed with great interest the announcements during the past week or so on the round 3 licences in which there has been an exceptional amount of interest in trying to take forward that investment.

The hon. Member for Angus often reminds us that a great deal of that renewable electricity generation will be off the coast of Scotland. Currently, 15 per cent. of all Scotland’s electricity is exported to the rest of the United Kingdom. I am not sure that “export” is the right word, but it is almost certainly the word that the hon. Gentleman would like to be used. The electricity comes from Scotland to England.

We export electricity not just to England, but to Ireland.

I feared that the hon. Gentleman would take us into a different debate, so I am glad to be corrected.

The potential for renewable electricity generation in Scotland is estimated to be 60 GW, which is 10 times the total demand in Scotland, so there is an enormous need to get that to market elsewhere. We are persuaded that if the offshore potential for wind is to be actively developed, it is important to have high-voltage DC cables along the coast, as set out by the National Grid in some of its proposals to link up many of those facilities, and to bring that power to areas where it is in greatest demand and of greatest use. National Grid estimates that such bootlaces would cost around £6.5 billion to build, and either it could be required to build them, or the process could be put out to tender if there was interest in doing so.

It will be very challenging indeed to meet the objectives and targets for offshore wind. At the moment, there is a shortage of ships, cranes, skills and money. Apart from that it is probably going rather well, but a great deal more needs to happen if we are to see the investment coming to fruition. The reason for the amendment is that the Government need to do more in taking a strategic lead, and requiring high voltage to be put in place will enable that to happen.

An issue relating to the supply chain is that if the market potential continues for the next 20, 30 or 40 years, not just to 2020, the companies that produce the cables will look to the United Kingdom as a place to invest. The extent to which high-voltage DC cables will be required will take up much of the world’s global output of every year over the next decade. There is a need for greater manufacturing capacity, and we all agree that we want that investment to come to Britain. To make those multi-million pound investment decisions, businesses need to understand that the Government have a clear strategy and will require the cablings to be put in place.

That is all made more complicated by the absence of a road map on how the renewables targets are to be delivered. I understand that the Government are working on a road map, but it seems rather slow in coming. We think that our proposal is a better way to do it, rather than requiring point-to-point connections. Our understanding is that that could make many projects  unaffordable, as was indicated by some of the academics who gave evidence to the Select Committee.

The Minister has the chance to be bold and say that we have a strategic opportunity. By this small amendment, we can require the cabling to be put in place and start to make more likely the delivery of the massive roll-out of off-shore wind.

This is a welcome short debate about how we get our infrastructure in place. I have a couple of questions for the hon. Member for Wealden and, like him, would also be interested in the Minister’s reply.

The first question arises from the amendment’s proposal of a competition. I wonder whether the hon. Gentleman has thought that the logical thing would be to have a competition for producing the place and type of infrastructure we need, given that there is an equally valid argument that Government, having talked to industry, need to decide the appropriate infrastructure, location and format.

My second question is connected to that. The hon. Gentleman has heard me say before that I am enthusiastic supporter of a European supergrid. We have various bits of a potential supergrid already in place around Europe. There are bits interconnected, and we have heard about some of them today, but the concept of a European supergrid is much bolder and bigger. I am not clear whether the hon. Gentleman and his colleagues believe that the best way to obtain the necessary energy security for Europe that could give us energy independence as a continent, is to work with our European colleagues and have a common European energy policy, which produces an agreed European supergrid, just as we need an agreed European train network. Government decide in essence where lines are going to go because they have to be interconnected. I have never heard the Conservatives say that they are signed up to that, and that it should be led by the European Union.

Whatever our arguments and differences about the European Union, energy policy, like environmental policy, is self-evidently better dealt with at a European-wide level where possible. The supergrid is clearly better sorted at a European level. We have several other countries immediately next to us: Ireland on the one side; the Netherlands, Belgium and France on the other. Scotland and the north-east have Scandinavian countries, in particular Denmark, Norway and Sweden, which are relatively proximate for potential supply. We know that there is currently a rather ridiculous and unco-ordinated set of activities building pipelines from Asia to Europe, influenced by all sorts of financial and political considerations. Competitive attempts are made to bring security of supply; some will avoid Russia and come further south; some will come through the Black sea or from the Caspian sea. There is a whole set of proposals.

Other countries in the European Union are extremely nationalistic about energy policy. The French and Germans have been particularly nationalistic about these things in the past. If we are to harness, particularly but not only, renewables to give us access to and security of supply of oil and gas from elsewhere—whatever our energy efficiency and reduction in consumption—we need a planned short, medium and long-term project up and running as soon as possible.

Finally, the hon. Member for Wealden and his colleagues have often heard me argue that the best way of maximising the benefit of renewables, both for use in and export from this country and for use in other countries across the European Union, is to allow for the hydroelectric schemes of Norway, the solar schemes of Europe’s Mediterranean countries and those on the south of the Mediterranean in north Africa—they are also interested in the issue—and for the tidal opportunities that I anticipate we will hear more about this spring when the Crown Estate announces the result of its work in the Pentland firth and so on. All that seems to logically point towards an integrated European supergrid. We, the UK, need to be signed up to that, as do Energy Ministers at the Council of Ministers.

I am not suggesting that our Secretary of State is not committed to that, but I doubt whether the Conservatives are, because I have never heard them say so. I would like to hear from the hon. Gentleman whether he, as his party’s spokesman, is willing to say, “We, the Conservative Party, pledge our undying commitment to a European energy policy with a European supergrid driven and promoted by the EU.” That would be a refreshing, positive and reassuring outcome. We may not, however, get such a statement today, tomorrow or any day between now and the general election. It would be an opportunity missed.

I have always been a bit concerned that the Conservative party has not caught up with the importance of working, planning and deciding together, so I am intrigued to know what lies behind this modest but potentially hugely important amendment. It would be important only if it became what Europe needs, which is a commitment to a European energy supergrid driven, organised and co-ordinated in the European Union.

I agree with much of what the hon. Gentleman has said. We have also been very supportive of the supergrid idea to link us with Scandinavia and other European countries. I have some concerns about amendment 25. First, given what has happened in the carbon capture and storage competition, the word “competition” fills me with dread in relation to energy policy. Another point is that high-voltage cables may be the way forward for the round 3 wind farms, but other wind farms, particularly in the Scottish sector, are nearer inshore where the more sensible thing to do may be to take the cables onshore and link to the grid through the existing infrastructure. That leads to the argument of transmission charges, but I will resist that today, because we have been through it many times. The argument, however, must be dealt with at some point. The high-voltage cable is a good idea, but, as the hon. Gentleman has said, we need to investigate the possibility of a European supergrid, which will allow us to import as well as export energy through our offshore renewables.

I think that there is a degree of confusion, and I hope that I will be able to clarify things. The hon. Member for North Southwark and Bermondsey asked about developing a supergrid and co-operation in Europe. The Government always seek co-operation within, and are an active member of, the European Union. The development of a supergrid could sit well with many of  our wider energy policy’s objectives, particularly our offshore wind policy. In December, my colleague Lord Hunt signed a political declaration with eight other European Energy Ministers from Germany, France, Belgium, the Netherlands, Luxembourg, Denmark, Sweden and Ireland to co-operate on the development of offshore wind infrastructure in the North and Irish seas. The intention is to prepare, at working level, a strategic plan for early this year to be enshrined in a memorandum of understanding to be signed in 2010. The hon. Gentleman will therefore see that we are willing to pursue those European connections. We see the sense of his argument. The European supergrid, which has been consented to by all the relevant members, must be one very positive potential future solution to securing all our energy needs in Europe.

I am aware of the agreement and I welcome it. Does the Minister think that the signatories, including this country, will seek to promote widening the agreement to the other 19 countries of the EU? The new Climate Action Commissioner is the Danish Minister and the new Energy Commissioner is the German nominee to the Commission. Will the Minister reassure us that the Government plan to engage early with those two key people in Brussels, so that there will be not just eight countries working together, but Britain leading 27 countries working together with the two key people in the Commission?

I can assure the hon. Gentleman that we expect to be positively engaged with new Commissioners. That is in all our interests. We know them well already and that is a very good start. I would not want to pre-empt what the working party hopes to bring forward, but it is called a strategic plan and I think that augurs well for the future. There are many Ministers in other countries, with whom we have very close connections, who share our aspirations for developing diversity of supply, serving our consumers well, and providing security of supply.

For the record, I should make it clear that we have decided that National Grid, as national electricity transmission system operator, NETSO, will be responsible for co-ordinating development of both onshore and offshore grid connections. That should ensure that the grid can be developed in a strategic and co-ordinated way, while being responsive to generators’ needs. Ofgem recently consulted on changing National Grid’s licence to, among other things, publish and keep updated an offshore development information statement that will present potential scenarios and National Grid’s best view of the development of the transition network offshore and the Crown status already agreed to assist National Grid in that work. I hope that is helpful to members of the Committee.

Clause 18 gives the Secretary of State the power to limit or eliminate the circumstances in which, or the extent to which, a licence holder may obtain an excessive benefit from electricity generation in a particular period. The intention is to prevent undue exploitation of market power where transmission constraints exist. The amendment seeks to add the establishment of a competition for constructing undersea high-voltage cables for connecting offshore generation to the onshore grid to the list of modifications that may be made by virtue of the Secretary of State’s powers in clause 18.

It is difficult to see what the amendment would achieve. The constructor or owner of the cable connecting offshore generation projects to the onshore grid has no role to play in the electricity balancing system and is therefore not in a position to significantly influence the conduct of a generator as regards constraint costs. There is no incentive for offshore generators, obviously, not to generate and transmit to the grid all of the electricity that they produce due to the level of payments that they receive through the renewables obligation certificates. Generators are also unable to increase generation at a given time due to the intermittency of the wind. In addition, the power in clause 18 (1) to amend generation licence conditions does not extend to the amendment of conditions of a transmission licence and would therefore not affect the holder of such a licence. Those companies participating in a competition for an offshore transmission licence are therefore highly unlikely to be in a position to engage in the undue exploitation of market power by generators, which is what clause 18 is designed to tackle. It would therefore not be appropriate to extend the scope of the clause in the way envisaged by the amendment.

I note that the Secretary of State has already used powers granted by the Energy Act 2004 to establish an innovative regulatory regime to connect offshore wind projects to the onshore grid in the most effective way. That regime allows for the construction and ownership of cables connecting offshore generation projects to the onshore grid to be undertaken by means of a competitive exercise. What the hon. Member for Wealden seeks to do through the amendment is not what clause 18 would do and the amendment is therefore inappropriate. The hon. Gentleman appears to seek to introduce competition into the process, probably in order to speed it up and get ahead. However, that is already being done in a different way using existing powers.

Ofgem has already commenced tendering for nine offshore generation project connections and expects to grant the first offshore transmission licences for those connections from summer this year. I therefore welcome the hon. Gentleman’s support for the competitive approach—I understand that in the past his party had not put forward such a measure in connection with these connections. I am glad that he now believes that to be the right way forward, and I assure him that it is already under way, albeit in a slightly different form. I hope that he is satisfied that a process involving competition is under way, and that he will feel able to withdraw the amendment.

This has been a useful and relatively brief debate on the issues involved in taking forward the investment in offshore generation. There has been a discussion about whether it should be a competition, and the Minister is absolutely right—when we initially made the proposal some months ago, there was a suggestion that National Grid should be mandated to put in place that connection. In response to representations by Ministers and others, we think that perhaps there is scope for doing it in a different way, and that a competition would be more appropriate.

The hon. Members for North Southwark and Bermondsey and for Angus clearly have doubts about competition. It could be that the competition would  come out with only one bidder willing to do the work, but at least it would have been done in a more open way. Similarly, if a competition for a new bus route solicited a bid only from Mr. Bayley’s bus services, and nobody else was interested in running that service, it would go forward in that way. However, that does not negate the purpose of having a competition in the first place.

The hon. Member for North Southwark and Bermondsey tried to put the debate into a European context. I shall endeavour to answer that without straying into a debate that would be more appropriate elsewhere, but I am keen to respond to his point. This matter can certainly tie into the concept of a supergrid. I think that I would be considered an early adopter of the concept of a supergrid, and we should pay great credit to Eddie O’Connor, who was one of the people who had the genius to develop the idea, and the imagination to try and drive it forward. The fact that it is now being taken so seriously owes a significant amount to the drive from him and his company.

The idea was also taken forward by Tony Blair as Prime Minister, who raised it directly with the German Chancellor to see whether we could try and move the discussions forward. In a way, the Minister’s response has shown the way that such things can be developed. There has been an agreement between a range of Energy Ministers from those nations that will be affected and who desire to work together, co-operate and try to deliver on this idea. It does not necessarily need to be something that covers every aspect of the European Union. I am not sure that Bulgaria, Romania and Greece have a particularly strong view about the development of a supergrid in the North sea. There is clearly a need for co-operation, but many of those things should be done through treaties and agreements between the individual nation states that have the most to gain and that will benefit most, rather than by requiring all 27 EU nations to reach agreement. In that way Norway could be part of an agreement, which clearly cannot be done within the European Union.

The hon. Member for North Southwark and Bermondsey mentioned the potential development of a southern grid linking into the solar power in the Sahara, and the discussion and development of that does not need to involve every northern European state, as that could impede progress rather than move it forward. He also mentioned some of the pipeline infrastructure, which tends to depend on treaty arrangements rather than on agreement by the whole of the European Union. Although the European Union may generally be supportive of the Nord Stream development, Russia has negotiated treaties with the nations through whose territorial waters the pipeline would pass to get their agreement to the concept. That is the right approach.

We have to be careful about the limit of European competence. I will be careful, Mr. Bayley, not to stray beyond the issues that we are looking at in the Bill. I would be nervous if there were to be a European energy policy that determined whether we could build nuclear power stations, that determined that CCS done only on a European competition model could go ahead and that we could not run our own national schemes, and that would have a Europe-wide approach to energy efficiency. There are individual national issues on which we should absolutely rightly be able to make decisions, but we completely understand that if we are trying to deal with  climate change and emissions, co-operation with our European partners plays an important part. I am therefore completely in favour of co-operation and of working together, but many of the issues ultimately come down to energy policies that should rightly be decided at national state level.

There is nothing in the amendment that would make it more difficult to develop a European supergrid, which would be a natural way of taking things forward. The thinking behind the amendment is to find a way of driving forward the investment that we are keen to see in the offshore renewables sector, not just in wind, but in the crucial development of marine renewables technology a decade or so from now.

The Minister has made some pertinent remarks about why it is difficult to tie in the amendment to this part of the Bill. We understand her concerns, and I will therefore seek leave to withdraw the amendment. Importantly, however, National Grid has been one of the organisations that have been most keen to develop the concept, because it sees it as particularly important for the level of investment required. The Government have up to now opposed the concept of high-voltage DC cabling. Lord Hunt, when he appeared before the Energy and Climate Change Committee, said as much, and I hope that we are beginning to see a softening of the Government’s approach. The Minister said that National Grid was in the position of co-ordinating the approach, and I hope that there will, therefore, be a generally open approach to how best to take things forward and encourage those sorts of investments. It may be that that sort of competition could be set up without the need for legislation, but that might be an issue for another Government to assess and see how best to take forward. We have had a useful debate about how we can best encourage development in the offshore renewables sector, a development which I think we all care to see very much indeed. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 36, in clause 18, page 16, line 21, at end insert—

‘(d) the minimum notice period by which the licence holder must inform their customers of any change in their energy tariffs.’.

With this it will be convenient to discuss the following: new clause 4—Transparency on energy bills—

‘(1) The Secretary of State may modify—

(a) a condition of the licence of section 11A of the Electricity Act 1989 (transmission licences and supply licences) to make provision on energy bills for information on the cheapest tariff available to the customer from their supplier;

(b) a condition of the licence of section 23 (1) (b) of the Gas Act 1986 (transmission licences and supply licences) to make provision on energy bills for information on the cheapest tariff available to the customer from their supplier;

(c) the standard conditions incorporated in licences under those provisions by virtue of those Acts;

(d) a document maintained in accordance with the conditions of licences under those Acts, or agreement that gives effect to a document so maintained.’.

New clause 18—Limit to number of energy tariffs for residential customers—

‘Within six months of the passing of this Act, the Secretary of State shall, by regulation, limit to no more than 10 the number of tariffs which each energy supplier may offer to any residential customer.’.

New clause 19—Publication of energy tariffs—

‘(1) Within six months of the passing of this Act the Authority will publish or cause to be published, at least three times a year, in national, regional and local press a full list of energy tariffs [“the consumer energy price list”] applicable for the next period of six months.

(2) The dates of the publication of the “consumer energy price list” shall be during the thirty days before—

(a) 1 April,

(b) 1 September, and

(c) 1 January.’.

New clauses 18 and 19 have been tabled by the Liberal Democrats, and new clause 4 by the Conservatives. I will take the items in the group in turn. I anticipate that my contribution will be interrupted by lunch.

Amendment 36 is on a matter that was pursued by the hon. Member for Amber Valley in her questioning of Mr. Alistair Buchanan when he gave evidence to the Select Committee in December. She had been well briefed, as always, by Which?, and I saw a fairly robust set of questions, putting to Mr. Buchanan and his colleague Mr. Wright, who appeared to give evidence, the point that Ofgem was not perceived as a great friend of consumers. In particular the hon. Lady pointed out a particular anomaly that is of concern at the moment.

The amendment would deal with that anomaly and would require the minimum notice period by which the licence holders must inform their customers of any change to their energy tariffs to be an automatic condition of the licence. I think that I shall be told by the Minister that it was already possible to include it as a condition; I want to ensure that it will always be included as a condition.

The issue arises because at the moment—and there is an early-day motion about it—energy companies have 65 days after a price rise to inform customers of it. Customers then have only 20 days in which to switch, after they have been informed. The research done by Which? shows that 98 per cent. of people want their supplier to notify them ahead of the price rise.

It seems obvious to me that a customer buying a product at price x, which is about to go up, who has a legal right to change at any time to another supplier, should know that the price is going up before it happens, rather than later. It certainly seems to me that 65 working days is a ridiculously long period in which to make it acceptable to tell customers that the price has gone up. It is something like three months.

I understand that the current licence condition dates back to 2006. Previously suppliers were required to give retrospective notification within 10 days. I do not think that there is any strong argument that retrospective notification is sufficient, and it seems to me that in this day and age people should be notified either at the time, or, preferably, in advance.

On page 115 of my copy of the uncorrected transcript of evidence of the Energy and Climate Change Committee sitting on 2 December 2009, when Mr. Buchanan,  Mr. Marlee and Mr. Wright gave evidence, the hon. Member for Amber Valley—I should probably have alerted her to the fact that I would be quoting her; but it will all be favourable comment, so she need not worry—said:

“On bills, Alistair”— it is a bit friendly—

“you were a bit damning earlier about how opaque the bills still are but I thought that was your responsibility. Have you not imposed a new licence condition that bills must be clear and easy to understand? Is it then your responsibility to go back and make sure that they are? This report is still very damning.”

There was a reply about those issues, but I shall hold off on that, as it relates to the new clause.

The hon. Lady went on:

“There have been fairly damning reports from both Which? and The Plain English Campaign. What about this phrase in the Which? Report that ‘the regulator's efforts to address confusing tariffs are weak and impossible to enforce, leaving consumers struggling to find and keep a good deal’. Would you care to comment?”

Again, I shall come back to the response. There was a series of exchanges and then the hon. Lady said to Mr. Buchanan:

“I found it confusing when I was suddenly approached in Sainsbury’s by somebody wanting me to sign up to some new contract there, and I am meant to know about these things and understand them.”

That led to debate about the issue of the advance or retrospective notification of price changes. Mr. Buchanan said:

“The second issue here, and because we were going to make an announcement I have been given permission by my sustainability senior partner to mention it today, is that I think Which? is touching on a very strong nerve when they talk about why companies have 65 days. We have just created a consumer panel of 100 people; we are going to ask them to have a look at this. Although the general probe...that Andrew has been talking about will get a full review in 2012, if we think this needs particular action sooner than that, then we will pursue that.”

The hon. Lady’s question was then:

“Why do you have to wait for a panel? Why can you not just tell them it is not acceptable? I do not know of anywhere else where somebody would take 65 days to tell me the price of something that I was buying was going up. You name another supplier of anything that I buy that would take 65 days to tell me?”

Mr. Buchanan said:

“It is good for us to talk directly with our consumer panel on this. That is what we are going to do. This is going to be their first project to look at.”

The Chairman adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at Four o’clock.